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TCL Associates

TCL Associates Takes Short Term Position in Gamestop

Communication, Communication Design

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TCL Associates has identified Gamestop, a video game retailer, as having major upcoming catalyst that will drive the stock higher. Microsoft and Sony will be competing as they release new consoles, but whoever win Gamestop will profit.

Gamestop has endured more than two years without many new video game platforms on older platforms, but now the retailer is about to have a slurry of catalysts that will drive the stock higher. Both Microsoft and Sony will release new consoles later this year as well as many releases from popular game franchises. TCL Associates analysts have set a target share price of $65, for January of 2014, after the upsurge of holiday and post-holiday sales, and $75 for the end of 2014.

In mid-November, Sony will release the Playstation 4 and Microsoft will release the Xbox One, but before this happens. There will be a final release of major games for the old generation consoles, in September Take Two Interactive will publish Grand Theft Auto 5, and Electronic Arts in October will put out Battlefield 4. Gamestop is positioned better than other retailers to take advantage of these market catalysts. The company forecasts profits in the upcoming quarter to increase by 45% from the same period a year earlier.

When the Xbox 360 was released in 2005, the Gamestop´s market value increased by nearly 50% by the time the Playstation 3 was released a year later. Over the next year the share priced doubled. The company is even better positioned to take advantage this console cycle as its retail market share has grown by about 20%. Gamestop has also improved its relationship with publishers, giving them the ability to receive advertising funds, secure larger inventories in advance, and organize launch parties at its retail outlets. They have also stated that they will receive larger console allocations from Microsoft and Sony, which will give foot traffic a boost during the first days of the consoles releases when they can be hard to find.